Regulatory Capitalism and China's Fragmented Regulatory State

Where does China stand in the development of its regulatory state?  Has regulatory capitalism produced the changes scholars had predicted a decade ago, or is China forging its own regulatory path?  And, to what extent are these changes reflected across economic and social forms of regulation in the country?  During the 1990s, regulatory governance across the globe began to converge on a new regulatory template of institutions and instruments: independent regulatory agencies, regulatory impact assessment frameworks, and risk-based analyses.  Indeed, the content of regulatory laws have also increasingly come to resemble one another as transnational institutions push for harmonization of standards and rules.   Whether it be a result of policy diffusion, policy convergence, ismorphism, or policy transfer, China’s developing regulatory state has adopted many of these institutional forms.  However, important variations in terms of institutional form and degree of harmonization with global regulatory norms appear across sectors (and sub-sectors) in the Chinese regulatory landscape. Finance, telecommunications, and energy regulatory reforms have increasingly outpaced sectors such as food safety and textiles in terms of regulatory convergence.  In some sectors, regulatory agencies fully comply with international regulatory agreements, whereas in others, such as anti-money laundering, China nominally complies and adapts rules in accordance with the country’s domestic political conditions.  Does China have a single modality of regulatory governance, or would it be more accurate to speak of the country’s regulatory “states” rather than a state?  What can explain this variation?  Answers to these important questions speak to a number of important issues in global regulatory governance: (1) the importance of sectoral variation in discussions of regulatory convergence; (2) domestic institutional and ideational obstacles to regulatory change; and (3) the bounds of adaptation (i.e. to what extent global regulatory best practice can be altered/indigenized before it is viewed as non-compliant).

A re-evaluation on the nature of China’s regulatory state is now long overdue.  In the early 2000s, Dali Yang discussed how the refashioning of China’s central government provided a template for a more effective regulatory state.  In 2005, Margaret Pearson asserted that China had not adopted the independent regulatory model, and that the state still largely operated according to political prerogative rather than technical concern across its “life-line” sectors.   In 2011, Roselyn Hsueh provided the latest account of China’s regulatory state, arguing that the state’s regulatory strategies (and its degree of convergence with international best practice) were different in sectors with strategic-value than from those without. 

In the last half-decade, however, important changes in the global regulatory order, and in China itself, demand a reassessment of regulatory governance in China.  First, Chinese regulators have increasingly begun to participate in global forum on regulatory best practice.  Representatives from newly formed agencies, such as the China Food and Drug Administration, now actively liaise with their counterparts in other countries, creating new channels for policy transfer.  In addition, global regulatory bodies are also becoming more acquainted with China’s particular regulatory challenges. Second, regulatory governance has become increasingly salient in a country that is now wracked by food safety scandals, environmental catastrophes, financial instability, and major transportation accidents.  The reconfiguration of regulatory bodies features prominently in the legislative agenda of the CCP each year.  Previous obstacles - bureaucratic turf wars, party control, and ministerial haggling over bureaucratic rank - have been overcome due to the sheer urgency of these regulatory crises.  Finally, the Chinese government has become more open to new forms of public-private regulation.  Experts contend that China is now experiencing a “spring” of third-party certification, and public-private collaborations that has altered how the state now approaches regulation.  Together these three trends have led to different variations of regulatory practice that needs to be taken into account in an assessment of China’s regulatory state.

This paper focuses on financial, aviation, energy, environmental, and food safety regulation in China.  These sectors represent the broad range of regulation in China – social vs economic, internationally-oriented vs domestically-oriented, and strategic vs non-strategic. I focus on explaining three-types of variation across these sectors: the degree of conformity with global standards; the degree of regulatory independence; and, the adoption of non-state forms of regulation.  The paper hypothesizes that the domestic political salience of these areas plays an important role in how policymakers approach regulatory reform.  In particular, the paper explores the role that mid-level technocrats and large Chinese firms play as they use the threat of crisis to push for bold experiments in regulation and create more space for the adoption of global best practices.  How they deploy sectoral linkages, and utilize pressure from transnational organizations has an important effect on regulatory development.

The paper draws on interviews with regulators, international organizations, technical experts, and companies in China.  In addition, international agreements, government reports, and statistics are consulted.